Japan’s Export Setback Raises Concerns Over Economic Recovery

Japan experienced its largest export decline since early 2021 in September, casting doubt on the strength of its economic recovery amid weakening global demand. According to a report from the Ministry of Finance, exports fell by 1.7% year-on-year, driven by a drop in shipments of cars, mineral fuels, and construction machinery. This marks the first decline in export growth since November of the previous year and contrasts with economists’ expectations of a modest 0.9% increase.

Meanwhile, imports saw a slight rise of 2.1%, primarily due to an uptick in electronic calculators and semiconductor components, though this fell short of the forecasted 2.8% increase. The country’s trade deficit narrowed to S$2.6 billion as a result.

The recent data points to Japan receiving limited support from external markets during the third quarter, reflecting a broader global slowdown. While the economy expanded in the second quarter, partly boosted by private consumption, that growth appeared to be a short-term rebound following a sharp downturn earlier in the year.

Yayoi Sakanaka, senior economist at Mizuho Research & Technologies, remarked that the weak performance in exports will likely hinder overall growth for the third quarter. She also noted that despite a slight depreciation of the yen, stronger external factors, such as China’s growing export dominance, are likely to overshadow any potential boost for Japanese exporters.

The downturn in exports is largely attributed to slowing global growth and rising uncertainty in major economies. Shipments to China dropped 7.3%, a stark reversal from the 5.2% increase seen the previous month. Exports to the US and Europe also fell, declining by 2.4% and 9%, respectively. The World Trade Organization recently revised its forecast for global goods trade in 2025, citing growing instability as a factor that could disrupt economic activity and hinder shipments.

However, central banks around the world have begun to reduce interest rates in an effort to stave off deeper slowdowns. In September, the US Federal Reserve announced a 0.5% rate cut, following a similar move by the European Central Bank. The ECB is expected to lower rates again at its upcoming meeting.

In Japan, the Bank of Japan is keeping a close eye on global trends, particularly developments in the US and China. Deputy Governor Ryozo Himino emphasized last week that employment and consumption data from these economies are increasingly critical to the BOJ’s policy decisions. The central bank noted in its recent statement that global economic growth, while moderate, remains under observation amid ongoing challenges.

Have you read?
The Daunting CEO Agenda: What it Means for Communications.
How to Write Attractive Book Proposals? Jennifer Scott Pens Some Tips.
The Psychology Tool Leaders Can Use to Increase Productivity.
Generative AI Offers Major Benefits for Independent Workers.
7 things I didn’t know about flying business class.